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Chapter 6Economies of Scale, Imperfect Competition,and International Trade
?Chapter Organization
Economies of Scale and International Trade: An Overview
Economies of Scale and Market Structure
The Theory of Imperfect Competition
Monopoly: A Brief Review
Monopolistic Competition
Limitations of the Monopolistic Competition Model
Monopolistic Competition and Trade
The Effects of Increased Market Size
Gains from an Integrated Market: A Numerical Example
Economies of Scale and Comparative Advantage
The Significance of Intraindustry Trade
Why Intraindustry Trade Matters
Case Study: Intraindustry Trade in Action: The North American Auto Pact
Dumping
The Economics of Dumping
Case Study: Anti-Dumping as Protection
Reciprocal Dumping
The Theory of External Economies
Specialized Suppliers
Labor Market Pooling
Knowledge Spillovers
External Economies and Increasing Returns
External Economies and International Trade
External Economies and the Pattern of Trade
Trade and Welfare with External Economies
Box: Tinseltown Economics
Dynamic Increasing Returns
Economic Geography and Interregional Trade
Summary
Appendix: Determining Marginal Revenue
nChapter Overview
In previous chapters, trade between nations was motivated by their differences in factor productivity or relative factor endowments. The type of trade which occurred, for example of food for manufactures, is based on comparative advantage and is called interindustry trade. This chapter introduces trade based on economies of scale in production. Such trade in similar productions is called intraindustry trade, and describes, for example, the trading of one type of manufactured good for another type of manufactured good. It is shown that trade can occur when there are no technological or endowment differences, but when there are economies of scale or increasing returns in production.
Economies of scale can either take the form of (1) external economies, whereby the cost per unit depends on the size of the industry but not
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